Part 3/9:
Each category serves different investment objectives, and I advocate for the dividend growth model, which emphasizes the long-term appreciation of dividend income.
The Power of Dividend Growth
Evaluating high-yield versus dividend growth stocks can significantly influence future returns. Take Verizon, for example, with a starting yield of 6.14%, which offers immediate cash flow, yet has a modest 10-year growth rate of 1.94%. In contrast, Domino's Pizza may have an initiating dividend yield of only 1.41%, but its 10-year compounded growth rate is a staggering 177%.
The critical insight here is that while high-yield investments may seem attractive for immediate cash flow, it's the companies like Domino's that can provide far greater returns through consistent dividend growth over time.